Every year, the sales peak ends at Christmas for most direct retailers. That means that the inventory returns peak is just starting.
While returns are inevitable, they often affect warehouse operations and customer service departments the hardest. However, these end-of-season returns also affect financial results because of their toll on profits. Merchandisers and inventory planners must account for returns throughout the year.
Soft goods (apparel) tend to have high return rates. Menswear and footwear averages a 10% to 20% return rate. A 20% to 30% return rate is typical for women’s basic apparel. Returns on women’s fashion apparel can go above 30%.
So why do these percentages matter? Think of it this way. A return rate of 20% for a retailer with $10 million in apparel sales means $2 million in returned sales. Include the resulting reduction in gross margin dollars plus the cost of processing returns: free return shipping costs, demand on your call center, funding a returns department, managing what becomes distressed inventory and it’s obvious that returns can deeply impact a company’s bottom line. Continue Reading…